It has been fascinating watching the play unfold since the Royal Commission released its final recommendations on mortgage brokers. The industry swung into defensive action very quickly, and for obvious reasons – I don’t think anybody wants a world where the big banks gain and small businesses go under. Customer experience, choice, and value are critical.
But resisting change is futile and exhausting. To me, the real question is how to win as this continues to play out in the coming months. At uno, we’re really focused on how we make the experience better and different for our customers. How do we add value continuously, not just when we might generate revenue?
That’s why we launched loanScore – a free monitoring service that tells you every month how your loan stacks up to thousands of deals on the market. We want our customers to know, regularly, whether they are getting a good deal or whether their lender has conveniently kept quiet if there’s a better deal available. Empowering Australians with this knowledge is critical because long-term mortgage customers pay up to 32 basis points more on average than new customers with the same bank.
I’m also really interested in the UK model. No trail there, and brokers are paid upfront commission by lenders. The fascinating thing is how lenders have had to change their game. The market is characterised by far more two, three, and five year deals (fixed or variable) and at the end of that ‘deal’, a high proportion of customers switch to a new deal.
What’s really interesting is that lenders have figured out they have to work hard to retain customers under this model and demonstrate that they are giving a customer value more continuously. So lenders in the UK pay brokers to retain customers at the end of the deal – it’s a slightly lower fee for the broker than if they switch the customer to a new lender but it shows that the banks genuinely want (and need!) to hang on to valuable customers in a world of best interests advice.
As the industry debates Hayne’s recommendations, the UK model seems like something we should be exploring in Australia.